Crude oil prices slipped below $119 a barrel on the New York Mercantile Exchange yesterday (Monday) for the first time in three months as tropical storm Edouard veered away from energy facilities in the Gulf of Mexico, and a government survey that revealed U.S. consumer spending flagged in June.

Light, sweet crude for September delivery tumbled $3.69 to settle at $121.41 a barrel yesterday, after earlier dropping below $119 a barrel for the first time since May.

Part of the reason for the decline was that tropical storm Edouard lost strength and turned westward to miss vital oil facilities in the Gulf of Mexico, but declining demand is probably the biggest figure in oil’s slump. Crude fell 11% in July after more than doubling in price over the 12 months prior.

“The fact that we’re lower seems to speak volumes about how (falling) demand has moved into the top place in this market,” Peter Beutel, oil analyst with Cameron Hanover, told CNNMoney.

A report from the Commerce Department yesterday showed consumer spending, adjusted for inflation, actually declined 0.2% in June, an indication that demand may further slacken. The Commerce Department said nominal spending grew 0.6% on the month, but the increase was all due to higher prices, which spiked 0.8%, the most for a month since 1981.

Overall, “the market remains bearish, both fundamentally and from [speculative] traders exiting positions,” Darin Newsom, a senior analyst at DTN, told MarketWatch. “Support is at about every $20, with initial support at last week’s low of $120.40 (roughly) and then between $102 and $98.”

The next stop is probably $100 “but will take some time to get there,” he said.

Source: Slackening Demand Causes Oil Prices to Slip